HSA: Switching from HDHP to PPO mid year

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wickur1619
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HSA: Switching from HDHP to PPO mid year

Post by wickur1619 » Mon Dec 02, 2019 2:44 pm

I have been on my current HDHP for 3 years. There is a possibility I would be switching from my current plan to a non HSA-qualified PPO plan mid year. Am I able to max out my HSA contribution of $3550 this year if I switch to the new PPO plan say July 1, 2020? Or would I only be able to do the equivalent of 6 months or ~$1775

nalor511
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Re: HSA: Switching from HDHP to PPO mid year

Post by nalor511 » Mon Dec 02, 2019 2:52 pm

You are able to contribute for month X if you are enrolled in an HDHP for the 1st of the month in question. If you are only a member on the 1st day of 6 months of the year, then your contribution eligibility is $FULL_AMOUNT * 6 months eligible / 12 month total = 50% . You can just plug in however many months out of the year that you were eligible on the 1st of that month.

Also keep in mind that ACA subsidies are given on a monthly basis, but at the end of the year they are trued up based on the full year's income, so if your income goes up then you mayhave to give some amount of credits back, if you received them in the first place based on a lower income expectation. Cheers.

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FIREchief
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Re: HSA: Switching from HDHP to PPO mid year

Post by FIREchief » Mon Dec 02, 2019 6:34 pm

wickur1619 wrote:
Mon Dec 02, 2019 2:44 pm
There is a possibility I would be switching from my current plan to a non HSA-qualified PPO plan mid year. Am I able to max out my HSA contribution of $3550 this year if I switch to the new PPO plan say July 1, 2020? Or would I only be able to do the equivalent of 6 months or ~$1775
Although you didn't ask, I will add that it is extremely easy to remove any excess HSA contributions during the year you contribute them, but not so easy if you wait until later. (see my signature)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

DarkHelmetII
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Re: HSA: Switching from HDHP to PPO mid year

Post by DarkHelmetII » Mon Dec 02, 2019 8:12 pm

Being a stickler on terminology though important in my opinion. HDHP / non-HDHP is a financial arrangement, PPO is a network characteristic. The below combinations, for example (this is non-exhaustive), can and do exist:

HDHP PPO
non-HDHP PPO
HDHP HMO
non-HDHP HMO

Many "exchange" and employer-sponsored plans are labeled such that the "PPO" option is non-HDHP but often (not always) when you dig deeper there is an HDHP option that has the very same PPO network as the "PPO" plan, simply with lower premiums and greater out of pocket expenses.

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grabiner
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Re: HSA: Switching from HDHP to PPO mid year

Post by grabiner » Mon Dec 02, 2019 10:32 pm

nalor511 wrote:
Mon Dec 02, 2019 2:52 pm
You are able to contribute for month X if you are enrolled in an HDHP for the 1st of the month in question. If you are only a member on the 1st day of 6 months of the year, then your contribution eligibility is $FULL_AMOUNT * 6 months eligible / 12 month total = 50% . You can just plug in however many months out of the year that you were eligible on the 1st of that month.
Note that the rule is different if you switch the other way. If you were enrolled in an HDHP on December 1, you can use the last-month rule to make the full year's HSA contribution, although there will be penalties if you do not remain enrolled in an HDHP for all of the following year.
Wiki David Grabiner

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oldcomputerguy
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Re: HSA: Switching from HDHP to PPO mid year

Post by oldcomputerguy » Mon Dec 02, 2019 10:44 pm

This topic is now in the Personal Finance forum (insurance).
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

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